Will Conagra Stock Recover?

Conagra Brands (NYSE:CAG) is a major producer of prepared meals, snack foods and other food products that owns some of the most recognizable brands in the United States.

The company’s stock, however, has been struggling. In the last year, shares of Conagra have dropped by more than 9 percent, and it looks like more tough times could still be ahead.

Will Conagra bounce back, or does this longtime food titan still have more room to fall?

Why Is Conagra Under Pressure?

Conagra shares found themselves on the ropes again shortly after the company’s updated outlook for 2025 was released. Management’s expectations for adjusted earnings per share were downgraded to $2.35 after previously being projected in a range from $2.45-$2.50.

Given that adjusted EPS in 2024 was $2.67, this guidance represents a significant retreat in non-GAAP earnings. Organic sales are also expected to fall by about 2 percent, another factor that puts downward pressure on the stock.

The sudden reduction of Conagra’s forward guidance was largely the result of supply chain factors. In Conagra’s press release, management cited quality inconsistencies at its main chicken production facility as one of the main causes for the less-than-enticing forward guidance. While the company appears to have solved the quality problems, it expects to see lower sales in H2 of 2025 as a result of the interruptions.

Frozen vegetables have also presented problems, though these stem from what would otherwise appear to be good news for Conagra. Demand for the company’s frozen vegetable products nearly doubled late in 2024, resulting in inventory depletion.

Until it can rebuild its inventories, Conagra will be allocating products to buyers. Though this will allow it to get back on track with regard to inventory, the company expects lower sales volumes in this category as a result.

Conagra’s Financials Disappoint But Moat Is Wide

One of Conagra’s largest problems is the fact that its revenues have been largely flat since 2022. Without substantial growth, the stock has struggled to keep up with other consumer staples companies.

Prior to 2022, the company had managed to keep revenues advancing steadily since the mid-2010s. This period of growth, however, was itself a recovery after revenues moved sharply lower in 2014 and 2015.

Net income also has been a problem for Conagra in recent years. The company’s trailing 12-month net income peaked in mid-2021 at a high of $1.3 billion. As of the end of 2024, that number had fallen to $494 million. With additional pressure on revenues and earnings expected to continue into 2025, it seems likely that this year will mark a continuation of the established downward trend in Conagra’s net income.

Despite its struggles, Conagra has the advantage of having several well-known brands that give it something of a competitive moat. The company’s list of name brands includes the likes of Banquet, Hunt’s and Slim Jim. With a respectable brand presence in snack foods and frozen meals, it’s likely that Conagra will remain relevant to consumers in the long run.

Does Conagra Look Cheap Now?

While lower forward guidance and flagging performance have brought CAG’s price down, the stock still trades at what is most likely a fair value range.

Conagra is priced at 1.0 times sales and 25.3 times earnings, neither of which immediately indicates that the stock is trading at a marked discount.

Even analyst price targets only imply about a 10 percent upside in the stock. This suggests that, even without unexpected downward pressure due to continued supply chain problems or an earnings miss, CAG would likely only make up the ground it has recently lost over the coming year.

Conagra’s Dividend Yield Is Still Extremely High

It’s worth taking Conagra’s significant dividend into account, as this may improve the outlook for shareholders somewhat.

At the moment, Conagra yields 5.4 percent, paying $1.40 per share each year. Over the last three years, the company has been able to raise its dividend at a respectable annualized rate of 4.9 percent.

However, this dividend puts the company’s dividend payout ratio at over 130 percent. If Conagra stagnates over the long run, investors could see the rate of dividend growth slow. As such, Conagra’s dividend may be more appealing from a current income perspective than for its potential to grow in the near future.

Will Conagra Stock Recover?

Conagra is likely to recover to $28.56 per share according to the 18 analysts who research the consumer packaged goods company.

Although Conagra is a major player in the prepared meals space, the company has seen several years of pressure on both its top and bottom lines. The developments that caused 2025’s reduced guidance are likely temporary, but the company may still be in for a period of stagnant growth ahead. Over the next five years, analysts expect earnings per share to contract at a rate of 0.5 percent annually.

Given that the stock doesn’t actually appear to be undervalued and that its revenues and earnings may well continue to decrease in the year ahead, a substantial recovery for CAG doesn’t seem imminent. In the long run, Conagra could mount a comeback if it can get its revenues and earnings growing reliably again. For now, though, there doesn’t appear to be a strong catalyst that would cause Conagra shares to move higher.

Conagra may also be subject to bigger picture torpedos that further hinder its performance. Resurgent inflation could raise input costs, putting additional pressure on the company’s margins. Like many other companies, Conagra could also suffer from deteriorating trade conditions that could increase the cost of imported ingredients and materials.

In the end, there doesn’t seem to be a compelling reason to buy Conagra at the moment. Those who already own the stock, though, may decide to hold it in order to take advantage of its rather large dividend. If the company can mount any kind of recovery in the future, the combination of a high dividend yield and some increase in share prices could allow the stock to deliver at least a decent return. While Conagra is unlikely to be a growth engine anytime soon, its dividend may make it suitable for investors looking for immediate income from their portfolios.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.